Buy Yes Bank Ltd - Motilal Oswal

YES BANK 3QFY11: PAT up 52% YoY; Margins drop 20bp QoQ but likely to improve; Business outlook remains strong; Buy

Loans grew 66% YoY and 2.5% QoQ. During the quarter, loans to TMT segment declined by ~Rs12b, while QoQ growth in infra, logistics was also muted at 3%.

NIM declined 20bp QoQ to 2.8%. Increase mix of investments in total assets and lower repricing benefit on investment portfolio resulted in drop in NIMs.

Overall deposits grew 79% YoY (down 1.4% QoQ), CASA deposits grew 81% YoY (flat QoQ). CASA ratio was marginally up at 10.2%.

Non interest income increased 27% YoY and 24% QoQ, due to higher income from financial market segment of Rs410m (vs Rs141m in 2QFY11).

Asset quality was stable with GNPA ratio at 23bp and Net NPA ratio at 6bp. Specific loan loss coverage ratio stood at 76% v/s 75% in 1QFY11.

Strong growth, proven execution capabilities, diversified fee income and superior return ratios are the key positives for Yes Bank. We expect Yes Bank to report EPS of Rs21 and Rs28 in FY11 and FY12 respectively. BV will be Rs110 and Rs135. Return ratios will be strong at 1.4-1.5% over FY11-13 and RoE is expected to be superior at 21%+ over FY11-13. Stock trades at PE of 10x FY12 and PBV of 2x FY12. Maintain Buy with target price of Rs405 (3x FY12 BV).

Source : Equity Bulls

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